SMEs (small and medium sized enterprises) are companies that are relatively small in size. They require less capital and often do not have to invest in heavy machinery. They operate in an industry that requires fewer workers. They tend to be locally owned and operated, often maintaining strong ties with their local customers. They can be found in all sorts of industries. These firms are important to the economy, since they help shape innovation. They are also often given special tax breaks and financing incentives.
Several countries have taken the lead in defining SMEs. For instance, Saudi Arabia has a General Authority for Small and Medium Enterprises, and Canada has a development bank that helps develop an SME ecosystem. The United States has the Small Business Administration (SBA), which has a list of small business size standards that can be used by loan officers and business owners. In addition, there are several national agencies that are specifically designed to aid SMEs. In addition, each country has its own stipulations for identifying SMEs.
The SBA defines a small business as one with fewer than 500 employees. A medium business is defined as one that has between 100 and 999 employees. For some industries, such as mining, an SME can have more than 1,500 employees. However, the definition of small varies wildly from country to country. In China, for example, retail companies are considered small if they have fewer than 10 employees. For manufacturing companies, the definition is more lenient, with the maximum number of employees being 500.
The Small Business Administration (SBA) has also devised a list of small business size standards that it uses when determining how much small business loans and other financing can be made. These include the market capitalization, the number of employees, and the number of assets. However, the SBA uses these definitions in a slightly different manner. The SBA also considers the type of industry a company is in when determining a business’s size. For instance, a restaurant may be considered a small business if it employs less than ten employees, but if it is a wholesale trade business, it may be considered a medium sized business.
The European Commission has also made a recommendation that defines the SME. It defines the SME as “an organisation that has a balance sheet total less than EUR43 million.” This is a very general definition, and is likely to be interpreted differently by different countries. It also monitors the implementation of the SME definition and reviews irregular intervals. It has been estimated that SMEs represent about 99% of the businesses in the European Union, and that their impact is felt in all areas of the economy. The SBA estimates that 44% of the U.S.’s GDP in 2014 was due to small businesses.
While the SBA has made a number of significant contributions to the economy, many other countries have taken the lead by developing national agencies that support SMEs. For instance, in the UK, the government has set a target of 25 percent of government spending to go to small and medium sized enterprises by 2022. In addition, most G-20 countries have created national agencies that help SMEs. Similarly, France, Canada, and Indonesia have dedicated ministries to support SMEs. In addition, the United States has a small business administration and a plethora of development banks, many of which specialize in assisting SMEs.